x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AN EXCHANGE
ACT
OF 1934
|
DELAWARE
|
13-3886065
|
|
(State
of Incorporation)
|
(IRS
Employer Identification
Number)
|
2910
Bush Drive, Melbourne, FL
|
32935
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
FINANCIAL
INFORMATION
|
|
|
|
|
|
FINANCIAL
STATEMENTS
|
2
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEETS:
|
|
|
MARCH
31, 2008 AND DECEMBER 31, 2007
|
2
|
|
|
|
|
CONSOLIDATED
STATEMENT OF INCOME:
|
|
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
|
4
|
|
|
|
|
CONSOLIDATED
STATEMENT OF CASH FLOWS:
|
|
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
|
5
|
|
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS:
|
|
|
|
MARCH
31, 2008
|
6
|
|
|
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL
|
|
|
|
CONDITION
AND RESULTS OF OPERATIONS
|
16
|
ITEM
3
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
18
|
|
|
|
CONTROLS
AND PROCEDURES
|
18
|
|
|
|
|
OTHER
INFORMATION
|
18
|
|
|
|
|
LEGAL
PROCEEDINGS
|
18
|
|
ITEM
1A
|
RISK
FACTORS
|
18
|
|
|
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
21
|
|
|
|
|
DEFAULTS
UPON SENIOR SECURITIES
|
21
|
|
|
|
|
SUBMISSION
OF MATTERS TO VOTE OF SECURITY HOLDERS
|
22
|
|
|
|
|
OTHER
INFORMATION
|
22
|
|
|
|
|
EXHIBITS
|
22
|
|
SIGNATURES
|
23
|
unaudited
|
|||||||
March
31,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Current
Assets
|
|||||||
Cash
|
$
|
118,836
|
$
|
394
|
|||
Accounts
Receivable, Net
|
567,714
|
39,606
|
|||||
Prepaid
Expenses
|
116,718
|
44,773
|
|||||
Total
Current Assets
|
803,267
|
84,773
|
|||||
Property,
Plant and Equipment, Net
|
1,248,642
|
500,350
|
|||||
Total
Assets
|
$
|
2,051,909
|
$
|
585,123
|
Audited
|
|||||||
March
31,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Current
Liabilities
|
|||||||
Notes
Payable, Current Portion
|
$
|
951,242
|
$
|
647,941
|
|||
Accounts
Payable and Accrued Expenses
|
1,888,566
|
843,328
|
|||||
Accrued
Payroll and Taxes
|
192,209
|
192,939
|
|||||
Billings
in Excess of Costs on Uncompleted Contracts
|
790,633
|
38,010
|
|||||
Deferred
Revenue
|
99,673
|
98,206
|
|||||
Total
Current Liabilities
|
3,922,323
|
1,820,424
|
|||||
Noncurrent
Liabilities
|
|||||||
Notes
Payable, Noncurrent Portion
|
578,246
|
622,918
|
|||||
Total
Noncurrent Liabilities
|
578,246
|
622,918
|
|||||
Total
Liabilities
|
4,500,569
|
2,443,342
|
|||||
Stockholders'
Equity
|
|||||||
Common
stock, $0.10 par value, 24,000,000 shares authorized; 7,468,465 shares
issued, 7,426,723 shares outstanding
|
771,844
|
771,844
|
|||||
Additional
Paid In Capital
|
12,099,150
|
12,099,150
|
|||||
Treasury
Stock
|
(819,296
|
)
|
(819,296
|
)
|
|||
Subscription
Receivable
|
(150,000
|
)
|
(250,000
|
)
|
|||
Accumulated
Deficit
|
(14,350,358
|
)
|
(13,659,917
|
)
|
|||
Total
Stockholders' Equity
|
(2,448,660
|
)
|
(1,858,219
|
)
|
|||
Total
Liabilities and Stockholders' Equity
|
$
|
2,051,909
|
$
|
585,123
|
Three Months Ended
|
|||||||
March 31,
|
|||||||
2008
|
2007
|
||||||
Sales
|
$
|
835,422
|
$
|
1,300,847
|
|||
Cost
of Sales
|
1,186,032
|
989,919
|
|||||
Gross
Profit (Loss)
|
(350,609
|
)
|
310,928
|
||||
Operating
Expenses
|
248,021
|
279,458
|
|||||
Income
(Loss) From Operations
|
(598,631
|
)
|
31,470
|
||||
Interest
Income / (Expense), Net
|
(91,811
|
)
|
(27,075
|
)
|
|||
Net
Income (Loss)
|
$
|
(690,441
|
)
|
$
|
4,395
|
||
Net
Income (Loss) Per Share:
|
|||||||
Basic
and diluted based upon 7,468,465 weighted average shares
outstanding
|
$
|
(0.09
|
)
|
||||
Basic
and diluted based upon 1,600,000 weighted average
shares outstanding
|
$
|
0.00
|
2008
|
2007
|
||||||
Cash
Flows From Operating Activities:
|
|||||||
Net
Loss
|
$
|
(690,441
|
)
|
$
|
4,395
|
||
Adjustments
to Reconcile Net Income to Net
|
|||||||
Cash
Used By Operating Activities:
|
|||||||
Depreciation
and Amortization
|
27,958
|
31,082
|
|||||
Decrease
(Increase) In:
|
|||||||
Accounts
Receivable, Net
|
(528,108
|
)
|
(476,273
|
)
|
|||
Prepaid
Expenses and Other Current Assets
|
(71,945
|
)
|
8,531
|
||||
Increase
(Decrease) In:
|
|||||||
Accounts
Payable, Accrued Expenses and Taxes Payable
|
1,044,508
|
454,986
|
|||||
Billings
in Excess of Costs on Uncompleted Contracts
|
752,623
|
-
|
|||||
Deferred
Revenue
|
1,467
|
-
|
|||||
Net
Cash Provided By Operating Activities
|
536,063
|
22,721
|
|||||
Cash
Flows From Investing Activities:
|
|||||||
Acquisition
of Property, Plant and Equipment
|
(776,250
|
)
|
-
|
||||
Net
Cash Used In Investing Activities
|
(776,250
|
)
|
-
|
||||
Cash
Flows From Financing Activities:
|
|||||||
Subscription
Receivable
|
100,000
|
-
|
|||||
Issuance
of Notes Payable
|
301,921
|
614
|
|||||
Repayment
of Notes Payable
|
(43,292
|
)
|
(472,994
|
)
|
|||
Net
Cash Provided By (Used In) Financing Activities
|
358,629
|
(472,380
|
)
|
||||
Net
Increase (Decrease) in Cash
|
118,442
|
(449,659
|
)
|
||||
Cash
at Beginning of Year
|
394
|
458,652
|
|||||
Cash
at End of Period
|
$
|
118,836
|
$
|
8,993
|
|||
Supplemental
Disclosure of Cash Flow Information:
|
|||||||
Cash
paid during the period for interest
|
$
|
91,811
|
$
|
186,806
|
|||
Taxes
Paid
|
$
|
-
|
$
|
-
|
September
30, 2007
|
||||||||||
As
|
As
|
|||||||||
Reported
|
Adjustments
|
Restated
|
||||||||
Liabilities
|
||||||||||
Current
Liabilities
|
||||||||||
Notes
Payable, Current Portion
|
$
|
510,181
|
$
|
-
|
$
|
510,181
|
||||
Accounts
Payable and Accrued Expenses
|
727,688
|
-
|
727,688
|
|||||||
Accrued
Payroll and Taxes
|
224,113
|
-
|
224,113
|
|||||||
Deferred
Revenue
|
98,206
|
-
|
98,206
|
|||||||
Total
Current Liabilities
|
1,560,188
|
-
|
1,560,188
|
|||||||
Noncurrent
Liabilities
|
||||||||||
Notes
Payable, Noncurrent Portion
|
752,384
|
-
|
752,384
|
|||||||
Total
Noncurrent Liabilities
|
752,384
|
-
|
752,384
|
|||||||
Total
Liabilities
|
2,312,572
|
-
|
2,312,572
|
|||||||
Stockholders'
Equity
|
||||||||||
Common
Stock
|
71,351
|
-
|
71,351
|
|||||||
Distributions
|
(158,283
|
)
|
158,283
|
-
|
||||||
Additional
Paid In Capital
|
9,840,614
|
(208,229
|
)
|
9,632,385
|
||||||
Treasury
Stock
|
(819,296
|
)
|
-
|
(819,296
|
)
|
|||||
Accumulated
Other Comprehensive Income
|
25,722
|
(25,722
|
)
|
-
|
||||||
Accumulated
Deficit
|
(10,474,629
|
)
|
75,668
|
(10,398,961
|
)
|
|||||
Total
Stockholders' Equity
|
(1,514,521
|
)
|
-
|
(1,514,521
|
)
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
798,051
|
$
|
-
|
$
|
798,051
|
2007
|
2007 |
||||||||||||||||||
As
|
As
|
As
|
As
|
||||||||||||||||
Reported
|
Adjustments
|
Restated
|
Reported
|
Adjustments
|
Restated
|
||||||||||||||
Sales
|
$
|
110,972
|
$
|
-
|
$
|
110,972
|
$
|
10,281
|
$
|
1,986,736
|
$
|
1,997,017
|
|||||||
Cost
of Sales
|
265,699
|
-
|
265,699
|
-
|
1,877,392
|
1,877,392
|
|||||||||||||
Gross
Profit
|
(154,727
|
)
|
-
|
(154,727
|
)
|
10,281
|
109,344
|
119,625
|
|||||||||||
Operating
Expenses
|
142,504
|
-
|
142,504
|
15,101
|
208,937
|
224,038
|
|||||||||||||
Income
from Operations
|
(297,231
|
)
|
-
|
(297,231
|
)
|
(4,820
|
)
|
(99,593
|
)
|
(104,413
|
)
|
||||||||
Interest
Income / (Expense), Net
|
(55,164
|
)
|
-
|
(55,164
|
)
|
-
|
(33,436
|
)
|
(33,436
|
)
|
|||||||||
Net
Loss
|
$
|
(352,395
|
)
|
$
|
-
|
$
|
(352,395
|
)
|
$
|
(4,820
|
)
|
$
|
(133,029
|
)
|
$
|
(137,849
|
)
|
||
Comprehensive
Loss:
|
|||||||||||||||||||
Net
Loss
|
$
|
(352,395
|
)
|
$
|
-
|
$
|
(352,395
|
)
|
$
|
(4,820
|
)
|
$
|
(133,029
|
)
|
$
|
(137,849
|
)
|
||
Other
Comprehensive Loss, unrealized
gain (loss)on
available-for-sale security:
|
(480
|
)
|
480
|
-
|
|||||||||||||||
Realized
holding gain (loss) arising during
the period
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Comprehensive
Loss
|
$
|
(352,395
|
)
|
$
|
-
|
$
|
(352,395
|
)
|
$
|
(5,300
|
)
|
$
|
(132,549
|
)
|
$
|
(137,849
|
)
|
||
Net
Income (Loss) Per Share:
|
|||||||||||||||||||
Basic
and diluted based upon 5,502,639 weighted average shares
outstanding
|
$
|
(0.05
|
)
|
$
|
(0.01
|
)
|
$
|
(0.06
|
)
|
||||||||||
Basic
and diluted based upon 5,024,465 weighted average shares
outstanding
|
$
|
(0.001
|
)
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
Nine Months Ended September 30, 2007
|
Nine Months Ended September 30, 2007
|
||||||||||||||||||
As
|
As
|
As
|
As
|
||||||||||||||||
Reported
|
Adjustments
|
Restated
|
Reported
|
Adjustments
|
Restated
|
||||||||||||||
Sales
|
$
|
1,789,643
|
$
|
(28,662
|
)
|
$
|
1,760,981
|
$
|
42,198
|
$
|
5,485,113
|
$
|
5,527,311
|
||||||
Cost
of Sales
|
1,314,469
|
-
|
1,314,469
|
-
|
4,327,693
|
4,327,693
|
|||||||||||||
Gross
Profit
|
475,174
|
(28,662
|
)
|
446,512
|
42,198
|
1,157,420
|
1,199,618
|
||||||||||||
Operating
Expenses
|
693,801
|
(104,330
|
)
|
589,471
|
64,106
|
749,185
|
813,291
|
||||||||||||
Income
from Operations
|
(218,627
|
)
|
75,668
|
(142,959
|
)
|
(21,908
|
)
|
408,235
|
386,327
|
||||||||||
Interest
Income / (Expense), Net
|
(127,125
|
)
|
-
|
(127,125
|
)
|
-
|
(186,806
|
)
|
(186,806
|
)
|
|||||||||
Net
Loss
|
$
|
(345,752
|
)
|
$
|
75,668
|
$
|
(270,084
|
)
|
$
|
(21,908
|
)
|
$
|
221,429
|
$
|
199,521
|
||||
Comprehensive
Loss:
|
|||||||||||||||||||
Net
Loss
|
$
|
(345,752
|
)
|
$
|
75,668
|
$
|
(270,084
|
)
|
$
|
(21,908
|
)
|
$
|
221,429
|
$
|
199,521
|
||||
Other
Comprehensive Loss, unrealized gain (loss) on available- for-sale
security:
|
2,400
|
(2,400
|
)
|
-
|
|||||||||||||||
Realized
holding gain (loss) arising during the period
|
(10,078
|
)
|
10,078
|
-
|
-
|
-
|
-
|
||||||||||||
Comprehensive
Loss
|
$
|
(355,830
|
)
|
$
|
85,746
|
$
|
(270,084
|
)
|
$
|
(19,508
|
)
|
$
|
219,029
|
$
|
199,521
|
||||
Net
Income (Loss) Per Share:
|
|||||||||||||||||||
Basic
and diluted based upon 5,185,685 weighted average shares
outstanding
|
$
|
(0.05
|
)
|
$
|
-
|
$
|
(0.05
|
)
|
|||||||||||
Basic
and diluted based upon 5,804,849 weighted average shares
outstanding
|
$
|
(0.004
|
)
|
$
|
0.034
|
$
|
(0.03
|
)
|
Nine
Months Ended September 30, 2007
|
||||||||||
As
|
As
|
|||||||||
Reported
|
Adjustments
|
Restated
|
||||||||
Cash
Flows From Operating Activities:
|
||||||||||
Net
Loss
|
$
|
(345,752
|
)
|
$
|
75,668
|
$
|
(270,084
|
)
|
||
Adjustments
to Reconcile Net Income to Net
|
||||||||||
Cash
Used By Operating Activities:
|
||||||||||
Depreciation
and Amortization
|
93,143
|
-
|
93,143
|
|||||||
Stock
Based Compensation
|
5,540
|
(5,540
|
)
|
-
|
||||||
Realized
Gain on Sale of Available-for-Sale Security
|
(22,131
|
)
|
22,131
|
-
|
||||||
Conversion
of Convertible Preferred Securities
|
(165,000
|
)
|
165,000
|
-
|
||||||
Assumed
Notes Payable in Acquisition, Net
|
790,686
|
(790,686
|
)
|
-
|
||||||
Distributions
Acquired in Acquisition
|
(158,283
|
)
|
158,283
|
-
|
||||||
Accumulated
Deficit Acquired in Acquisition
|
(2,366,108
|
)
|
2,366,108
|
-
|
||||||
Decrease
(Increase) In:
|
||||||||||
Accounts
Receivable, Net
|
(119,571
|
)
|
385,098
|
265,527
|
||||||
Note
Receivable, Net
|
4,500
|
(4,500
|
)
|
-
|
||||||
Investment
in Available-for-Sale Security
|
18,100
|
(18,100
|
)
|
-
|
||||||
Prepaid
Expenses and Other Current Assets
|
(49,904
|
)
|
20,473
|
(29,431
|
)
|
|||||
Increase
(Decrease) In:
|
||||||||||
Accounts
Payable, Accrued Expenses and Taxes Payable
|
879,292
|
(825,267
|
)
|
54,025
|
||||||
Billings
in Excess of Costs on Uncompleted Contracts
|
-
|
(650,771
|
)
|
(650,771
|
)
|
|||||
Deferred
Revenue
|
98,206
|
-
|
98,206
|
|||||||
Net
Cash Used In Operating Activities
|
(1,337,282
|
)
|
897,897
|
(439,385
|
)
|
|||||
Cash
Flows From Investing Activities:
|
||||||||||
Acquisition
of Property, Plant and Equipment
|
(717,945
|
)
|
620,046
|
(97,899
|
)
|
|||||
Net
Cash Used In Investing Activities
|
(717,945
|
)
|
620,046
|
(97,899
|
)
|
|||||
Cash
Flows From Financing Activities:
|
||||||||||
Gross
Proceeds from Sale of Available-for-Sale Security
|
20,000
|
(20,000
|
)
|
-
|
||||||
Recapitalization
due to Merger
|
-
|
(81,437
|
)
|
(81,437
|
)
|
|||||
Issuance
of Notes Payable
|
499,337
|
(308,036
|
)
|
191,301
|
||||||
Repayment
of Notes Payable
|
(27,458
|
)
|
-
|
(27,458
|
)
|
|||||
Additional
Paid-in Capital
|
1,493,874
|
(1,493,874
|
)
|
-
|
||||||
Net
Cash Provided By Financing Activities
|
1,985,753
|
(1,903,347
|
)
|
82,406
|
||||||
Net
Increase (Decrease) in Cash
|
(69,474
|
)
|
(385,404
|
)
|
(454,878
|
)
|
||||
Cash
at Beginning of Year
|
73,248
|
385,404
|
458,652
|
|||||||
Cash
at End of Period
|
$
|
3,774
|
$
|
-
|
$
|
3,774
|
||||
Supplemental
Disclosure of Cash Flow Information:
|
||||||||||
Cash
paid during the period for interest
|
$
|
129,098
|
$
|
-
|
$
|
129,098
|
||||
Taxes
Paid
|
$
|
-
|
$
|
-
|
$
|
-
|
Useful
|
March
31,
|
December 31,
|
||||||||
Life
|
2008
|
2007
|
||||||||
Facility
|
20
|
$
|
182,078
|
$
|
182,078
|
|||||
Capital
Improvements
|
5
|
55,610
|
55,610
|
|||||||
Construction-in-Progress
(a)
|
(a)
|
|
776,250
|
-
|
||||||
Machinery
& equipment
|
5
|
347,971
|
347,971
|
|||||||
Heavy
equipment
|
7
|
107,156
|
107,156
|
|||||||
Vehicles
and trailers
|
4
|
7,000
|
7,000
|
|||||||
Computer
equipment
|
3
|
450
|
449
|
|||||||
Furniture
and fixtures
|
5
|
25,773
|
25,773
|
|||||||
1,502,289
|
726,038
|
|||||||||
Less:
accumulated depreciation
|
(253,647
|
)
|
(225,688
|
)
|
||||||
Net
property and equipment
|
$
|
1,248,642
|
$
|
500,350
|
(a) |
Modular
buildings for lease. The buildings are projected to be in service
in the second
and/or third quarter of 2008. The useful life will be 20
years.
|
Debt obligations consist of the following:
Due | March 31, | December 31, | |||
Date | 2008 | 2007 | |||
Avante Holding Group, Inc., revolving credit, | |||||
principal and interest at prime plus 4%. | July 2008 | $ | 577,521 | $ | 296,469 |
Bank of America, line of credit, interest only | |||||
payments at 11.75%. The amount is guaranteed | |||||
by Joseph Sorci. | February 2013 | 100,000 | 100,000 | ||
Caterpillar Financial Services Corporation, | |||||
principal and interest at 2.8%. Monthly | |||||
payments of $1,018.49. Note collateralized by | |||||
Catapillar Excavator. The amount is | |||||
guaranteed by Joseph Sorci. | July 2008 | 4,634 | 5,638 | ||
Caterpillar Financial Services Corporation, | |||||
principal and interest at 3.92%. Monthly | |||||
payments of $1,616.61. Note collateralized by | |||||
Catapillar Telescopic Handler. The amount is | |||||
guaranteed by Joseph Sorci. | July 2009 | 31,502 | 31,502 | ||
Regions Bank, principal and interest at prime | |||||
rate. Monthly payments of $10,002.99. The | |||||
balance is guaranteed by Joseph Sorci and | |||||
Michael W. Hawkins. | June 2012 | 443,781 | |||
Bridge Note, issued by multiple individuals. | |||||
Interest only payments with interest at 10%. | August 2008 | 128,000 | 128,000 | ||
Spectra Contract Flooring Services, Inc., | |||||
promissory note with interest at 9%. Monthly | |||||
payments of $2,845.53. | December 2008 | 23,253 | - | ||
Wells Fargo, principal and interest at 7.99%. | |||||
Monthly payment of $2,097.42. The amount is | |||||
guaranteed by Michael W. Hawkins. | September 2011 | 24,493 | 24,493 | ||
Weaver Precast of Florida, LLC, promissory | |||||
note with interest at 5%. Monthly payments of | |||||
$10,767.67. | December 2009 | 196,304 | 225,906 | ||
1,529,488 | 812,008 | ||||
Less: Current portion | 951,242 | 647,941 | |||
Total long-term debt | $ | 578,246 | $ | 164,067 |
The combined aggregate monthly payment amount for notes payable, as of March 31, 2008, is $29,415.38. Avante Holding Group, Inc. and Bank of America have a variable payback schedule that is not fixed. Therefore, they are not incorporated into the monthly minimum obligations schedule.
Future minimum obligations for the above notes payable are as follows:
2008 | $ | 378,813 |
2009 | 260,564 | |
2010 | 120,036 | |
2011 | 120,036 | |
2012 | 60,018 | |
Total Lease Obligations | $ | 939,467 |
NOTE 5 – COMMITMENTS
The Company leases the property where its manufacturing operation is located. The lease expired on December 31, 2007 and is now a month-to-month lease. Monthly lease payments are $4,000.
Future minimum obligations for the above leases are as follows:
2008
|
$
|
36,000
|
||
2009
|
48,000
|
|||
2010
|
48,000
|
|||
2011
|
48,000
|
|||
2012
|
20,000
|
|||
Total
Lease Obligations
|
$
|
200,000
|
Three
Months Ended
|
|||||||
March
31,
|
|||||||
2008
|
2007
|
||||||
OPERATING
REVENUE
|
|||||||
Manufacturing
|
$
|
826,945
|
$
|
1,300,847
|
|||
Leasing
|
8,477
|
-
|
|||||
Consolidated
Totals
|
$
|
835,422
|
$
|
1,300,847
|
|||
INCOME
(LOSS) FROM OPERATIONS
|
|||||||
Manufacturing
|
$
|
(581,885
|
)
|
$
|
31,470
|
||
Leasing
|
2,600
|
-
|
|||||
Corporate
|
(19,346
|
)
|
-
|
||||
Consolidated
Totals
|
$
|
(598,631
|
)
|
$
|
31,470
|
||
IDENTIFIABLE
ASSETS
|
|||||||
Manufacturing
|
$
|
1,267,182
|
$
|
585,123
|
|||
Leasing
|
784,727
|
-
|
|||||
Corporate
|
-
|
-
|
|||||
Consolidated
Totals
|
$
|
2,051,909
|
$
|
585,123
|
|||
DEPRECIATION
AND AMORTIZATION
|
|||||||
Manufacturing
|
$
|
27,958
|
$
|
31,082
|
|||
Leasing
|
-
|
-
|
|||||
Corporate
|
-
|
-
|
|||||
Consolidated
Totals
|
$
|
27,958
|
$
|
31,082
|
On February 10, 2008, Alternative Construction Manufacturing of Florida, Inc. ("ACMF"), a subsidiary of Alternative Construction Technologies, Inc. ("ACT"), contracted with SSL to build two buildings for Gulfstream Aerospace, Inc. ("Gulfstream") for $1,040,000. ACMF subcontracted with NCSI to build the two buildings. ABCC and ACT have common ownership and an officer and director. Michael W. Hawkins, a significant shareholder of the Company through ownership of Avante and GAMI, is a significant shareholder of both ACT and ABCC. Additionally, Mr. Hawkins is the CEO and Chairman of ACT. Furthermore, Bruce Harmon, the Interim CFO and a Director of ABCC, is also a Director of ACT. ABCC could not fund the needs of the contract with GulfStream through conventional or unconventional methods. ABCC did have three financing options, two of which would require for the outright sale of the buildings at a loss to ABCC of more than $200,000 with no potential the projected long-term revenue opportunity of a five year lease to Gulfstream with two renewable five year terms. These options were considered as loss leaders which provided no guarantee for positive revenue for ABCC for the future. The third option, provided by ACT was the only viable option available that (i) ensured ownership of the buildings remained with SSL; (ii) guaranteed 100% of the revenue recognition to SSL as provided by the contract; and (iii) ensured that SSL could deliver its product within a reasonable timeframe. Due to this situation, ABCC was in danger of losing a profitable contract for a five-year leasing of the buildings, with two additional five-year periods, along with the potential for additional leasing opportunities of the buildings and up to 25+/- more buildings for Gulfstream. The ABCC management views Gulfstream as a potential customer with significant revenue opportunities over the next 15 years. Additionally, at the end of the lease term(s), ABCC would maintain ownership of the buildings providing additional revenue through the sale to GulfStream or a third party(ies). To ensure that ABCC would not lose a significant part of their revenue stream, which included revenue to ACT through its purchases of the ACTech® Panel from ACMT, management of ACT and ABCC determined that the agreements as stated above would benefit both companies as ACT did have the financing to ensure ABCC the opportunity to fulfill the contracts. As ACT would have potential risk if NCSI and/or ABCC would encounter problems or legal issues associated with the transaction, the two contracts, SSL / ACMF and ACMF / NCSI, would favor ACMF versus NCSI. The transaction was not at arm's length but the management of ABCC had no other options. ACMF agreed to provide the financing strength with the potential risk exposure. SSL contracted ACMF for $1,040,000 for the two buildings. ACMF contracted with NCSI to provide the two buildings for $748,800. The profit margin was determined to be reasonable under these circumstances with the risk to SSL for not fulfilling the contract with Gulfstream. As an additional condition of the contract between ACMF and NCSI, NCSI was liable for the actual cost of capital incurred by ACMF and/or ACT in conjunction with this project. The estimated cost of capital is $116,000. Under these terms and conditions, NCSI would recognize an estimated loss of $267,200 on the construction of the buildings whereas ACMF would recognize a profit of $291,200. The directors and management of ABCC agreed to the loss as they recognized the potential and opportunities outweighing the potential for legal remedies that Gulfstream could seek for non-performance.
Joseph Sorci, the CEO for the Company, is also CEO and principal shareholder for Florida Architects, Inc. ("FLA"). FLA performs various architectural roles for the Company in conjunction with evaluating, bidding, planning and actual building of the Companys projects. All transactions are conducted as an arms length transaction.
No.
|
Description
|
|
SIGNATURES
Date:
May 14, 2008
|
|
By:
|
/s/
Joseph Sorci
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date:
May 14, 2008
|
|
By:
|
/s/
Bruce Harmon
|
Interim
Chief Financial Officer (Principal
|
|
Accounting
and Financial Officer)
|